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Case Study Excerpts From September Issue

“Global Logistics and Supply Chain Strategies”

… Stiphout’s task was to tighten up the internal organization and turn Efficient into a viable company, by traditional business standards.

An all-out, unfocused attack on the organization would fail, Stiphout knew. So he homed in on one aspect of the company’s operations that was in dire need of change: the supply chain.

… he turned for help to Dynamic Cycle-Time Reduction Associates Inc., a Dallas-based consultancy. Supply-chain veteran Jon Kirkegaard, DCRA’s founder and president, had done work for Efficient even before it was acquired by Siemens. The two companies would now design a system to foster a high degree of product customization, and tight relations with Asian contract manufacturers.

“We wanted a top-class supply chain,” says Stiphout, a 30-year veteran on the financial side of Siemens. “This business is very fast moving and volatile. There’s lots of pressure on prices and competition, especially from Asia.” Efficient’s task was to craft a network that would serve as a barrier both to new and existing rivals in the DSL market.

DCRA came up with a program it called Total Order Fulfillment (TOF), with the intent of maximizing both customer-order fill rates and unit profitability. At the same time, it sought to reduce fixed and variable costs in warehousing, transportation and equipment. The strategy would build on Efficient’s model of selling equipment to large telecoms before building the product, then drop-shipping from plant to customer whenever possible. The system also had to take into account short lead times, even as it held down safety stocks, says Kirkegaard.

Between February 2002 and June of this year, Efficient’s inventory turns improved by a factor of eight. Accounts receivable DSO was down by 65 percent. Working capital went from four turns to a negative 14 turns, reflecting the company’s ability to get paid faster while postponing expenditures on manufacturing components.

Per-unit supply-chain management costs are down 61 percent from last year. At the same time, throughput capacity has increased by 38 percent, and overall costs have plunged 50 percent.

Efficient’s fledgling build-to-order program is achieving 100-percent delivery, and 99.8-percent on-time arrival. The program remains in its early stages, with volumes still low, Stiphout says.

The Complete Case on Siemens and Efficient Network is Coming in the September 2003 Issue of “Global Logistics and Supply Chain Strategies”

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